The Chartered Institute of Purchasing and Supply index, which covers businesses ranging from hotels to financial services, ticked up to 57.6 last month from 57.0 in July. Analysts had forecast a dropback to 56.5. A reading above 50 indicates growth.

The services index follows from a robust manufacturing index earlier this week which showed activity surged to a three-year high in August.

"There is little evidence from the service sector survey that the financial market turmoil is currently feeding through to dampen activity, although it is probably premature to expect this," said Howard Archer at Global Insight.

Analysts said that the resilience of the service sector, which accounts for three-quarters of the UK economy, may renew the case for another interest rate rise by the Bank of England's monetary policy committee, which begins its two-day meeting today to decide borrowing costs for September.

The City is expecting rates to be left on hold at 5.75% tomorrow, but with little evidence of the credit market troubles hurting the economy, some economists are saying rates may move to 6% by the year end. The MPC has already raised interest rates five times since August 2006 from 4.5%.

The MPC signalled in its Inflation Report in early August that another rate hike may be needed to keep inflation on track.

"Accelerating service sector activity in August, still robust new business growth and an increase in the prices charged index indicate that it is premature to discount interest rates reaching 6% before the end of the year," said Mr Archer.

However, the government's favoured consumer price measure of inflation showed a surprise drop to 1.9%, falling back below the Bank's target of 2% for the first time in a year and a half.

Confidence remained highest in IT and lowest in hotels and catering, according to the purchasing managers' survey. Sentiment in financial services also remained relatively high, despite recent news of hedge fund collapses and investment fund bail-outs.

The new business gauge held well above the 50 level that divides growth from contraction and expectations for growth over the coming year remained high, even if below peaks scaled earlier in the year.